Monitoring reductions in financed emissions

We said...

In 2022, we said that by 2030, we wanted to reduce Scope 1 and 2 portfolio-level emissions intensity to 13 tCO2e/£m invested. This represents a 75% reduction relative to the portfolio emissions in 2019. Our listed equity investments are held through the LPPI Global Equities Fund (GEF). The GEF is actively managed, meaning that the individual companies it holds can change over time depending on LPPI’s investment views. Changes in the companies held in the GEF can result in significant changes in carbon footprint – both up and down – from one year to the next. The GEF’s carbon footprint should be expected to rise and fall each year on its way to the 2030 goal – it is unlikely to be a steady, predictable, downward trend. The 2030 goal was set based on analysis of the GEF’s current and projected future carbon footprint using the sectoral decarbonisation pathways implied by the One Earth Climate Model. We know that our goal of 13 tCO2e/£m by 2030 is an ambitious one. For comparison, in 2021 the GEF’s benchmark had a carbon footprint of 148 tCO2e/£m.

The Net Zero Investment Framework (NZIF) aims to avoid an approach to target setting that incentivises investors to take actions that reduce their greenhouse gas (GHG) emissions purely to meet a specific target in a given year – sometimes referred to as ‘greening the portfolio’. For example, it would be counterproductive to divest from a company where engagement is generating results. For this reason, the portfolio emissions reduction goal is considered as a ‘reference target’ – it is used to keep track of progress, but it is not the primary way of making progress towards net zero. 

Where are we now?

At the end of the first half of 2023, the Scope 1 and 2 emissions intensity was 12.8tCO2e/£m invested. This is the lowest point it has been measured since we announced our net zero ambition. It’s also the first time it has gone below the level we said we want our fund to be by 2030. 

During the first half of 2023, due to some restructuring of our portfolio by LPPI, we reduced the number of high carbon intensity utilities sector companies in our portfolio. This contributed to this fall in portfolio emissions intensity. Alongside this, we are also pushing for change with other high-emitting companies in our portfolio. This is where we will make the most real-world change. 

The graph below shows how our emissions are declining. It doesn’t mean that we’ve done our job, it just means that we’re ahead of target and ahead of time. As our portfolio constituents continue to change over time, we will see this number continue to evolve significantly when we add in Scope 3 emissions data to this goal.